Follow by Email

Monday, January 28, 2013

A cute definition of the problem!

"What
I do miss is the lack of understanding that the switch of the Drachma to Euro's
did mean a switch from a devaluation economy to one without that
possibility.You can't switch from
diesel to gasoline without switching the engine. Greece kept on using the same
engine".

That's cute!

It doesn't quite hit the mark, though. Both, a diesel engine and a gasoline engine fulfill the objective of an engine equally well --- i. e. to move the car. If one defines the objective of an economy to increase the economic well-being of all, then I would argue that a devaluation economy does not fulfill this objective equally well as one without that possibility. By and large, there is no free lunch in an economy; someone always pays the bill. In a devaluation economy, a lot of people are paying the bill without knowing that they do.

Still, Greece's challenge is to change the engine. If Greece cannot meet this challenge, a devaluation economy may become the lesser evil.

4 comments:

Some reply from Yiannaki: You're right of course concerning the economic issue. For me it is important to understand that the Greek did not understand what they were doing when switching their currency.

As we do not know when we say "Yes, I will", when there is the question if one is willing to stay with the other "till death us do part" . What that marriage will be, we do not know. A marriage is fulfilled at the end, and a lot start several times in a lifetime and promise the same. Failing again. And trying again.

When going to the West, Columbus did not know what was there, but he went anyway. Maybe the ship was falling from the horizon. Into that what they did not know.Such a courage!!When astronauts were trained to be in space, they did not know in fact how it would be in reality. Such a courage!!Always there is something risky.But not a reason not to try, to start, to dare.Life IS risky. It is better to take a risk and even to have the misery of a wrong decision then to have tried nothing at all.

Often we follow a dream, Beethoven dreamed about a united people, presidents talk about it, so I do not understand why there was something "stupid" when the euro was an idea. I think it is a brilliant idea. That it takes time to be a success is not strange: we learn by doing, all has its smaller or bigger problems. People learn form it. Life is a university. By falling and standing up again we learn to walk. Wonderful!!

There is a difference between taking some risks, and just stepping into the water without knowing how to swim.The mistake the 16 other countries made was that they expected that the Greeks could swim.They cannot.They were just playing around on the beach, without any rule to create a wonderful society life there. The Greeks are trying to survive now in deeper water, because too many take their place on that heavenly beach without rules, corrupted. It is much more serious there now, more and more, and yes, they are almost drowning.Europe tries to save them.They do not want.They are angry and suspicious about any help.They are proud. Children of Alexander, the Great Greeks of the past, the wise and intelligent Greeks, so they do not need to learn to swim. They are born perfect.But nobody is perfect.They blame everybody now that they are drowning.THEY, the others, did it.Others brought disaster, hell.They blame even those who want to help.

It is Greek drama . It belongs to the Greek soul. Not understood by not anybody else than another Greek.

Let us ask ourselves what sort of impact a devaluation of the drachma would have had. Whilst there would be no need for austerity, it would be thrust upon the Greeks in as clear a way as it is today.

Because devaluing a currency is something that needs a great deal of courage - if, that is you aren't going to continue to devalue in order to avoid difficult decisions.

Britain has printed, the US has printed, Greece borrowed. All avoiding difficult decisions, many of which are still to be taken - at least in the case of the first two countries.

Greece has - to a degree - done something. Only too late. The euro was an opportunity for Greece to invest, not go on a spending spree. As with all binges, you hit a wall at some point. Reality kicks in, kicking you with hard boots.

The other side of the coin - the banks that lent the money - is another question and one that can't be covered in a small comment. They too were under pressures, only this time through the mis-match of German and US banking systems.